To Every Stock There Is A Season: Traders Turn, Turn, Turn Out Of Tech
The Dow hit a fresh record high on Friday morning as investors continued to turn away from tech stocks for the relative safety of industrials and financial stocks.
- UNH stock is climbing. See the chart and price action here.
The Dow Jones Industrial Average has shattered record-highs this week and did so without help from the all-star Mag Seven, as investors ditch high-flying AI darlings for the reliable blue-chip giants of the Dow.
Valuation Over Vision
Big Tech has powered the market’s gains for years, but the winds could be shifting due to “AI fatigue” and stretched valuations.
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Nvidia Corp. (NASDAQ:NVDA) shares stumbled after SoftBank exited its massive stake, signaling that even the smartest money is taking profits.
Oracle Corp. (NYSE:ORCL) shares sold off after missing cloud revenue targets, shaking faith in the infinite growth narrative.
Adding to the chill, Broadcom, Inc. (NASDAQ:AVGO) saw its shares drop Friday, even after posting strong Q4 results. Investors seemed fixated on dipping margins rather than revenue growth, a classic signal that the bar for tech has become impossibly high.
“It no longer makes sense for us to continue recommending overweighting the information technology and communications services sectors," said Ed Yardeni, President of Yardeni Research.
Flight to Safety
Investors are not leaving the market, but they are moving neighborhoods. The Dow's recent surge has been fueled by healthcare, industrials and financial stocks.
“We're running out of time [for the tech rally] … we have this defensive tone that is developing in the market,” said Adam Turnquist, chief technical strategist for LPL Financial, in late November.
Healthcare titans Merck & Co. (NYSE:MRK), and Johnson & Johnson (NYSE:JNJ) have rallied, offering steady cash flows and dividends that nervous tech investors may crave.
Meanwhile, heavyweights like Goldman Sachs Group, Inc. (NYSE:GS) and UnitedHealth Group, Inc. (NYSE:UNH) have done the heavy lifting, pushing the index to fresh records.
Bucking Seasonal Trends
The current rotation is fascinating because it defies traditional “Santa Claus rally” logic. Typically, year-end trading favors high-beta “risk-on” tech stocks. Instead, the market is seeing a defensive bull run.
Traders are ignoring the calendar's usual call for volatility and heading for the safety of the Dow over the uncertain promise of the Nasdaq.
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